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Project on performance_appraisal_330

  1. 1. OBJECTIVES OF THE PROJECT• This project has been undertaken to share my experiences on Performance appraisal system as well as to enhance my understanding of this fascinating subject by doing some study & research.• The project explains the meaning of Performance Appraisal, different methods used to evaluate the performance of employees, its effective implementation and the benefits of the system.• It also aims at understanding the problems associated with performance appraisal and suggests measures to be adopted to overcome these issues.• Overall objective of the project is to understand the effectiveness of performance appraisal system. 1
  2. 2. SCOPE OF THE PROJECTThis project report covers the definition and meaning of Performance Appraisal. Itelucidates the benefits and drawbacks of the traditional methods as well as recentadvances in the field of performance appraisal.The project throws light on the concern areas for different people involved in theappraisal process and attempts to find out ways to overcome those problems.Appraisees and appraising managers have both been given guidelines in evaluationprocess and subsequently the review meeting. It emphasizes how this approach willhelp the appraisees by giving them an opportunity to assess and correct areas thattheir supervisors feel may have overlooked. Such incidences do happen due topersonal likes and dislikes of superiors. The system can help management to takeinformed decisions on pay-hikes and career enhancement for their employees.Few formats of the performance appraisal forms have been included in the project toshow the way different companies are evaluating the performance of theiremployees.Thus, through this project report one can: have a reasonable understanding of the term performance appraisal; understand what needs to be done for its effective implementation; know the key areas of performance indicators; understand the benefits of the system; know how it helps in designing the Performance Rated Pay system; know how it helps in planning of career of employees; know how it helps in the future requirement of the organization as it grows. 2
  3. 3. EXECUTIVE SUMMARYPerformance Appraisal is a crucial activity for organizations that are looking for growth andprofit maximization in this ever-increasing competitive environment. This project report is areview based on theory as well as research and experience.The research report starts with the background and explains it’s importance in thePerformance Management System and also it’s changed scenario in Chapter 1.The essential components of an effective performance appraisal system consist ofunderstanding it’s Foundations and the essential steps that lay the foundation. It is alsonecessary to recognize the Objectives and Benefits of this system. For benefit realization itis necessary to Identify Key Result Areas (KRAs) i.e. Goal Setting and monitor resultingPerformance so that a meaningful relationship between performance, reward anddevelopment of required skills, through counseling – if required, can be established. Finallylot of brainstorming is required to be done to devise a sound appraisal system by evaluatingavailable techniques and implementation processes. One must remember that performanceAppraisal is an inexact, human process and it is quite a challenge to actually implement itsuccessfully. All these aspects form subject matter for Chapters 2 through 8.Performance appraisal system has gone through a sea change over a period of time. In thebeginning the process was non-transparent and the employee was kept in dark about hisperformance. No systematic exercise was done and the entire process was arbitrary. Theseearlier performance appraisal methods are discussed in Chapter 9.The current processes of performance appraisal involve self-appraisal by the employee too.Thus the system has gone through the phase of non-transparency to transparency. Inthe transparent system of appraisals appraisee is taken into confidence and the wholeprocess is interactive. Review process with employees is designed in such a way thatemployees become aware of what is expected from them, receive timely feedback andrecognition for their achievements. Some of these relatively transparent methods areAppraisal Discussion-Dialogue Method of Appraisal, Competency Based Appraisal System,Potential Appraisal, Performance and Development Planning. While new frontiers toperformance appraisal include Management by Objectives, 360º Feedback and BalancedScorecard. These methods are explained in depth in Chapters 10 and 11 respectively. Inthis technology driven era appraisals too can be done electronically. eAppraisal systemwith its salient features, benefits and process has been covered in Chapter 12.Finally, the report is rounded up by presenting a case study on one of the top Indianpharmaceutical companies as Chapter 13 and concluded in Chapter 14.The report is made useful for readers by incorporating Suggestions and Recommendationsfor all concerned on how to make a grand success of appraisal system followed by theirorganizations.Few blank formats of different appraisal methods and processes have been included asAnnexures (Annexure I to IX) in the report to show how today’s successful organizationsare trying to assess and evaluate their employee performance.In conclusion, this project report will enable one to understand the concept ofPerformance Appraisal; it’s evolution from non-transparent to a transparent system.The report will also help to understand benefits and drawbacks of past and presentappraisal systems. Most importantly, the report will assist the reader in implementingappraisal system as effective management tool for realizing organization’s as well asindividual’s goals and objectives. 3
  4. 4. RESEARCH METHODOLOGYThe study of the topic “Performance Appraisal” has been done through varioussources.The primary source includes the personal experience, which has been added in thisproject as the `Sample of Current Practice-Case Study’ in Chapter 13.The secondary sources include:• information gathered through surfing the internet;• information available on intranet site on Knowledge Management;• different study materials;• private circulations from consultants;• deliberations with practicing consultants and experts in the field;• sample Performance Appraisal forms obtained from reliable resources. 4
  5. 5. Chapter 1 INTRODUCTION: CONCEPTUAL FRAMEWORKI. Background: 1. The concept of Performance Appraisal dates back to the First World War and was then called “Merit Rating Programme”. Over a period of time, this concept has been through an ocean of change. The areas of evaluation have also changed. 2. Once an employee has been selected, trained and embarked on his duties, it is time for performance appraisal. What is performance appraisal? Why do companies need to take up this task? 3. According to Carl Heyel, author/editor on management, philosopher and teacher, “it is the process of evaluating the performance and qualifications of the employees in terms of job requirements, for administrative purposes such as placement, selection and promotion, to provide financial rewards and other actions which require differential treatment among the members of a group as distinguished from actions affecting all members equally”.II. An integral part of performance management system: 1. Effective performance management requires a good deal of face-to-face supervisor-employee interaction. By knowing the subordinates, a supervisor can steer them onto a path of greater productivity and optimized output. Long-term successful business owners view performance appraisal as a process of getting to know the people who work for them. It is the most significant and indispensable tool for an organization. It provides information, which helps in taking important decisions for the development of an individual and the organization. 2. Thus, one phase of the annual performance management cycle is performance appraisal, the process of reviewing employee performance vis-à-vis the set expectations in a realistic manner, documenting the review, and delivering the review verbally in a face-to-face meeting, to raise performance standards year over year through honest and constructive feedback. In the process management expects to reinforce the employee’s strengths, identify improvement areas so that one can work on them and also set stretched goals for the coming year. 3. It is composed of the following two processes both of which are qualitative subject to human bias – a. observation and b. judgment 4. The parameters of performance are a combination of technical expertise and behavioural attributes. The latter scores a high degree of relevance with regard to potential appraisal. 5
  6. 6. III. Concept Of Performance Appraisal: The concept of Performance Appraisal can be explained with the analogy illustrated below: → The head of the key represents the uniqueness of the employee. No two employees are alike. → The ring represents the management’s requirement -the job content. → The shaft represents the communication between the employee and the company, the transmission of the task and the response from the performer.IV. Change: 1. A few decades ago, the employee used to be appraised by his department head. The department head used to communicate his feedback and comments only to the immediate superior of the employee. Thus the feedback was kept confidential in nature. As time passed by, the immediate superior started appraising his subordinate’s performance and sending his confidential report to the department head. These were the periods when the employee was not included in his appraisal process. The decisions used to be taken by his superiors relating to his pay hike, promotion etc. Thus the system was non-transparent. 2. The current process of performance appraisal is much more open and gives some scope for self-appraisal by the employee. The self-appraisal is followed by a joint discussion with superior and then a decision is taken by the department head on his promotion, pay hike etc. The feedback relating to his performance is directly given to the employee. Thus performance appraisal process has gone through the phase of non-transparency to transparency. 3. In this transparency phase, a performance appraisal can be defined as a structured formal interaction between a subordinate and supervisor, that usually takes the form of a periodic interview (annual or bi-annual), in which the work performance of the subordinate is examined and discussed, with a view to identifying weaknesses and strengths as well as opportunities for improvement and skills development. 6
  7. 7. 4. Whether an organization accepts or not the usefulness of Performance Appraisal, whether it adopts a formal appraisal system or not, top management is constantly appraising the performance of its subordinate managers in day-to-day interaction. The latter are doing the same to their own subordinates. They are doing so because Performance Appraisal, formal or informal, lies at the heart of art of managing. 5. Managing is a dynamic process, concerned almost entirely with the present and the future, whereas Performance Appraisal, as generally used has been a static rating of an employee related almost entirely with the past. Recently, as some managements were recognizing that “rating” by itself had very limited utility, they began to appreciate that managing had evolved into an art. They saw that “management by hunch” could not longer be tolerated, and that measurements-no matter how vague – were essential for the future development of the art of managing. 6. The need for measurements gave birth to several “systems” of managing which attempted to apply measurements of various sorts to the different aspects and elements of the manager’s job. A number of these systems leaned on the better Performance Appraisal methods for their measuring devices or at least for a starting point for measurement. In some instances, these systems expanded or broadened the meaning of Performance Appraisal from a mere rating to include the whole concept of management with all its elements.What set’s the foundation of Performance Appraisal? The same has beencovered in the following Chapter 2. 7
  8. 8. Chapter 2 FOUNDATIONS OF PERFORMANCE APPRAISALPerformance Appraisal assesses how well people have been doing their jobs andwhat they must do to be better in their jobs. It deals with the content of the job andwhat they are expected to achieve in each aspect of their work. Following are thefoundations in Performance Appraisal process:I. Job Profile: Job description concentrates more on the definition of tasks the jobholder has to accomplish. It includes details of reporting relationship and normally covers the overall purpose of the job. It indicates how an individual’s job will contribute to the achievement of objectives of a team or a department and, ultimately the mission of the organization.II. Objectives: An objective describes something, which has to be accomplished. Objectives define what organizations, functions, departments, teams and individuals are expected to achieve. There are two types of objectives: i. Work or Operational Objectives: It refers to the results to be achieved or the contribution to be made to the accomplishment of team, departmental and corporate objectives. ii. Developmental objectives: It is concerned with what individual should do and learn to improve their performance and/or their knowledge, skills and competencies (training and personal development plans).III. Competencies: Competencies refer to the behavioral dimensions of a role. It is the behavior required of people to carry out their work satisfactorily. Competencies are what people bring to a job in the form of different types and levels of behavior. They govern the process aspects of job performance.IV. Values: Increasingly, organizations are setting out the core values that they think should govern the behavior of all their employees. Value statements may be prepared which define core values in areas such as care for customers, concern for people, competitiveness, excellence, growth, innovation.What are the essential steps that set the foundation for an effectivePerformance Appraisal? These steps have been covered in Chapter 3. 8
  9. 9. Chapter 3 THREE ESSENTIAL STEPS FOR EFFECTIVE PERFORMANCE APPRAISALThe process of getting to know the people who work for the organization involvesthree essential steps viz. training, evaluation and review. I. Training: Successful training is the implementation of a system in which everyone in the workplace is geared towards improvement. It involves a hands on approach in which the employee is encouraged to evaluate himself or herself under the guidance of the appraiser. How it works? First, the appraiser includes the employee in the appraisal process. When an employee knows that his or her opinion of other workers is taken into account, he or she also realizes that everyone else’s opinion matters just as much. This not only empowers the employee and improves relations in the workplace, but it encourages higher productivity as well. This interactive approach is made complete with the leadership of the appraiser. Carefully administering praise coupled with constructive criticism keeps the workforce on its toes.II. Evaluation: The best methods for employee evaluation are based on results and behavior. While conducting performance appraisal based on employees’ characteristic traits is quite common, the results are often subjective and unsatisfactory. A results-based approach to performance appraisal is by far the cleanest, most objective method of tackling the complex task of evaluation. It uses a rating system to measure productivity within a given timescale. If an employee makes a certain number of sales in a certain week, he or she can be rated by sheer worth as well as ranked against other employees. The study of behavior is closely tied to productivity. The pace of work, willingness to put in overtime and ability to work with others all contribute to overall productivity.III. Review: The review process should, again, employ the techniques of interactivity. Before sitting down together, the appraiser should give the employee a chance to review himself or herself. This not only empowers the employee, but also saves a lot of time and possible contention during the actual discussion. Initially the appraiser should walk the employee through the process. The successful supervisor starts out with an overview of why the review session is needed. Then the supervisor takes the employee down a point-by-point list of every aspect of the job. In each case, the employee should be given a chance to describe his or her achievements and shortcomings. The supervisor should always supplement this with added insight. While praising and applying criticism, the supervisor maintains authority throughout the review and indeed, the entire appraisal process.How this entire interaction and review process is beneficial to the organization as awhole and what are the objectives of performance appraisal? These have beenjotted down in the succeeding Chapter 4. 9
  10. 10. Chapter 4 OBJECTIVES AND BENEFITSThe objectives and benefits of Performance Appraisal system can be summarized asunder:I. Objectives: Data relating to Performance Appraisal of employees are recorded, stored and used for several purposes like: • Let the employees know where they stand in so far as their performance is concerned and to assist them with constructive criticism and guidance for the purpose of their development. • Assessment of skills within an organization. • Set targets for future performance. • Effect promotions based on competence and performance. • Strengthen relationship between superior and subordinate. • Assess the training and development needs of employees. • Identify the strengths and weaknesses of employees. • Decide upon a pay raise (increments). • Improve communication as it not only provides a system for dialogue between the superior and the subordinate, but also improves understanding of personal goals and concerns. This can also have the effect of increasing the trust between the appraiser and appraisee. • Determine whether human resource programs such, as selection, training and transfers have been effective or not.II. Benefits: The following are the benefits of a successful appraisal system: 1. For the Organization: ♦ Improved performance throughout the organization due to: − Effective communication of organization’s objectives and values. − Increased sense of cohesiveness and loyalty. − Managers are better equipped to use their leadership skills and to develop their staff. ♦ Improved overview of tasks performed by each member of a group. ♦ Identification of ideas for improvement. ♦ Creation and maintenance of a culture of continuous improvement. 10
  11. 11. ♦ Communication to people that they are valued. 2. For the appraiser: ♦ Opportunity to develop an overview of individual jobs. ♦ Opportunity to identify strengths and weaknesses of appraisees. ♦ Increased job satisfaction. ♦ Opportunity to link team and individual objectives with department & organizational objectives. ♦ Opportunity to clarify expectations that the manager has from teams and individuals. ♦ Opportunity to re-prioritize targets ♦ Means of forming a more productive relationship with staff based on mutual trust and understanding. ♦ Due to all above Increased sense of personal value 3. For the appraisee: ♦ Increased motivation and job satisfaction. ♦ Clear understanding of what is expected and what needs to be done to meet expectations. ♦ Opportunity to discuss aspirations and any guidance, support or training needed to fulfill these aspirations. ♦ Improved working relationships with the superior. ♦ Opportunity to overcome the weaknesses by way of counseling and guidance from the superior ♦ Increased sense of personal value as he too is involved in the appraisal processIn line with the objectives of Performance Appraisal, to reap it’s benefits, this systemhas to be effective failing which it may mar the very purpose of performanceappraisal.How to make the appraisal process effective is what has been covered in thesubsequent Chapter. 11
  12. 12. Chapter 5 EFFECTIVE APPRAISAL PROCESSWhen it comes to performance appraisal, managers and employees agree about onething: They hate going through them. Employees, managers and HR experts agreethat fear, guilt, responsibility and resentment are the real reasons why mostemployees dread the appraisal process. Besides some think that it is a ritual that ismandatory to follow.An effective review process helps organizations in three areas: 1. evaluation and improving personnel selection and training systems; 2. preventing wrongful termination; and 3. increasing real employee diversity I. Good appraisals start with information from multiple sources, and they evaluate employees at all levels from top to bottom. II. This system requires both the appraisee and appraiser to jointly assess the employee’s ability to complete the duties and achieve the goals set forth in the previous appraisal.III. HR professionals should consider the following steps and make the appraisal process simple yet effective: • The performance Appraisal form should reflect the strategic objectives of the company. Many organizations use a form that contains several sections. • The results and impact section should address accomplishments related to job responsibilities, goals and projects. It is a review of past performance. • A skills and abilities section should discuss the ways those results were accomplished. By listing the core competencies for each job classification – and for the entire organization – this section can address the kinds of behavior that are critical for success.IV. Appraisal results, either directly or indirectly, determine reward outcomes. The better performing employees may get the majority of available merit pay increases, bonuses and promotions, while the poorer performers may require some form of counseling or in extreme cases no increases in pay. The assignment and justification of rewards and penalties through performance appraisal is a very uncertain and controversial matter and conveys both satisfaction as well as dissatisfaction with an employee’s job performance. Whatever is the case, organizations should foster a feeling that performance appraisals are positive opportunities that provide for overall development of the employee, in order to get the best out of the people and the process. Hence performance appraisals should be positive experiences and it should never be used to handle matters of discipline.Performance review needs goals to be set first. Identification of Key ResultAreas i.e. Goal Setting has been explained in the Chapter 6. 12
  13. 13. Chapter 6 IDENTIFICATION OF KEY RESULT AREAS (KRAS) – GOAL SETTINGSetting of Key Result Areas i.e. goals is one of the various parameters ofperformance evaluation. These are also known as the Targets or PerformanceIndicators (PI). Target setting is the first step in the appraisal process, based onwhich the employee is appraised.I. The Purpose or Objective of Target Setting ∙ Ensure that each individual is working towards clearly stated objectives that tie into the division goals. ∙ Provides a sound basis to improve performance. ∙ Encourages open communication concerning expected results and progress towards results. ∙ Helps the individual know “How he/she is doing” compared to what his/her manager expects. ∙ Encourages comparison on individual objectives to identify overlapping or omitted objectives. ∙ Helps in salary review, and self-development. The recent trend from a focus on traits or behavior to a results-oriented approach has seen the emergence of objectives setting as a key issue. However, managers should attempt to agree objectives with their staff rather than setting them themselves for the forthcoming period during appraisal discussion. These objectives or targets should comply with the mnemonic SMART i.e. Specific, Measurable, Achievable, Realistic and Time-bound.II. SMART criteria for performance goals SMART Performance Criteria Checklist Goals Specific States in clear terms ∙ Does it specify what outcome, result or - Improved level of quality, quantity, time or behaviour is to be use of resources. achieved. - A new/innovative result, faster time line, or - An improved behavioral outcome? ∙ Does it have a clearly stated singular result? Measurable Includes measurable ∙ Will you know from information, data or results or a description of observation when it is achieved? the desired outcome. ∙ Does it specify-What? How much? How well? 13
  14. 14. SMART Performance Criteria Checklist Goals Achievable A realistic expectation, given ∙ Are resources, authority level, and requisite time and resources skills in place? ∙ Does it require a stretch of effort? Realistic There is a clear tie to goals ∙ Will it matter when it is done? of the department, division ∙ Does the objective support relevant goals? etc. ∙ Does it deal with a key aspect of the job? Time Bound There is a time limit or ∙ When are the goals to be completed? deadline by which the ∙ Is there a timetable for milestones or objective must be achieved checkpoints? and there may be a time frame to track phases of completion in an action plan.III. Type of Goals: One may have to set multiple goals combining goals at different levels viz. the long-term goal, the short-tem goal and the minimum or standard goal. 1. The long-term goal: The long-term goals are the level of performance sought over a period of one to two years. Usually this level is significantly better than current performance. In some cases, the long-term goals are the ultimate level of performance, such as “zero defects” or “zero absenteeism”. Unlike the other two goals (described below), the long-term goals can be dictated by management without regard to past performance or to whether the long-term goals is currently perceived as attainable. 2. The short-term goal: The short-term goals is the level of performance desired and perceived as being attainable with some effort within a period ranging from three months to one year. At the end of that time, short-term goals are re-evaluated based upon performance. The expectation is that when the short-term goal is consistently being met, it will be moved closer to the long-term goal. ∙ It must be less than or equal to the long-term goal ∙ It cannot be better than the best performance ever achieved; and ∙ It must be better than the current average or typical performance. Short- term goals are negotiated. Usually employees and lower level managers recommend and develop short-term goals subject to approval by management. 14
  15. 15. 3. The Minimum or Standard goal: The minimum or standard goal is the cut-off point for signaling the existence of or potential for a performance problem. Like short-term goals, minimum standards are set for a limited period but for longer duration – perhaps one to two years. Minimums/standards are negotiated like short-term goals and must conform to the following criteria: ∙ They must be less than or equal to current average/typical performance; and ∙ They cannot be worse than the worst performance for any previous period.IV. To aid goal setting the following steps may be adopted: 1. Consider the job on the following areas: - Routine responsibilities - Problem solving responsibilities - Innovative responsibilities - Development responsibilities 2. Locate key tasks in each of the above areas. 3. Periodic Progress Review The intent of this review is to provide a reconfirmation of direction to maintain commitment for the balance year. Targets, though should be stable over the performance period, should be flexible enough for revision when changes in priorities or responsibilities lead to the expectation of different results.V. Key Steps to Goal Setting: 1. The appraiser should: ∙ in advance, review notes on employee’s performance; ∙ discuss targets, praise achievements and identify causes of targets not being met; ∙ discuss performance skills, reinforce good performance and identify causes for skills not being met; ∙ agree on the plan for corrective actions to be taken by both; ∙ where necessary, revise targets; ∙ create a non-threatening climate and express confidence. 2. Joint Accountability: Management must recognize that most results are achieved through the corporate efforts of two or more people. Therefore, the management style must encourage maximum individual contribution in co-operation with others. Decision on pay hike, promotion and development is outcome of target achievement and the same has been detailed in following Chapter 7. 15
  16. 16. Chapter 7 PERFORMANCE, PAY AND DEVELOPMENTThe outcome of the appraisal is either in the form of reward by way of increase inpay, additional bonus or incentive and/or promotion, or by way of not effecting anyincrease in pay, denying promotion etc. This gives emergence to the concept ofPerformance Related Pay (PRP).I. Performance related pay is not an easy option. Before embarking on its introduction the following factors should be taken into account. 1. Matching the Culture: Successful PRP schemes need to match the culture and core values of the organization. It is only by understanding and working with the culture that it is possible to develop schemes. 2. Linking PRP to the Performance Management process: The focus when relating pay to performance needs to be one of the issues which emerge from the business planning process such as profitability, productivity, cost control, research initiatives, product and market development and generally increasing stakeholder value. 3. Balancing performance measures: The performance measures used as a basis for rating must include a balanced mix of both input factors (skills and competences) and output factors (performance and contribution). The assessment upon which pay decisions are made should be based not only on performance in achieving objectives, contribution to organizational success and the levels of skill and competence achieved, but also on the degree to which the behavior of individuals support corporate values in such areas as teamwork, total quality management, customer services, innovation, etc. 4. Flexibility: PRP arrangements should allow for some flexibility in the criteria for reward and the method of payment. 5. Teamwork: Poor PRP schemes can produce a lot of single-minded individuals. The importance of teamwork should be recognized in structuring the scheme and in defining critical success factors and performance indicators. Individuals should be aware that achieving their targets at the expense of others is not considered competent performance. 6. Avoiding Short-termism: To avoid the danger of PRP focusing attention on short-term results at the expense of more important longer-term objectives, long-term as well as short-term goals should be set wherever appropriate and short-term objectives should be discussed in their overall context. 16
  17. 17. 7. Involvement in the design process: The design of PRP schemes is usually an iterative process- trying and testing ideas on measures and structure with those who will eventually be involved in the scheme. It is also a valuable learning process, which can throw up fundamental strategic and business issues. Those due to participate in the scheme should have an input into agreeing critical success factors and performance indicators both for themselves and the organization.8. Getting the message across: PRP provides a very powerful form of communication. To get the right messages across, the following question will have to be dealt with: a. Assess reasons for PRP • Why do we want to introduce PRP? • What, realistically, do we expect to get out of it? b. Assess readiness for PRP • Is PRP right for our culture? • Do we have the Performance Management and other processes in place required for successful PRP? • Are the attitudes of management and other employees in favour of PRP? (An attitude survey can be conducted to establish opinions). • Do the people concerned with managing PRP have the required skills and resources? • Is PRP likely to make a significant enough impact on performance to justify the costs of developing, introducing and operating the scheme? c. Decide whether or not to introduce PRP • Does the result of the above assessment indicate that PRP is right for the organization? • If no, what are the alternatives? There are many: Consider performance-related team pay, organization-wide profit sharing or profit-related pay plans, gain sharing, the use of incentive or bonus schemes, concentrating more on the motivational aspects of Performance Management, job re-design to increase motivation, performance-related training more intensive management coaching and training to improve leadership abilities, process re-engineering to improve organizational performance and productivity. d. Brief, consult and involve employees • How should employees be informed of the organization’s objectives and intentions concerning the introduction of PRP? • How do we minimize concerns about PRP through this briefing process? • To what extent and how should we consult and involve employees? 17
  18. 18. e. Design scheme • What criteria should be used for determining PRP awards? It can be an appropriate mix of: − Input criteria related to the skills and knowledge brought to bear on fulfilling role responsibilities − Process criteria related to the behavioral competencies used successfully in achieving results − Output performance indicators related to the achievement of objectives and meeting performance requirements as set out in statements of principal accountabilities or main tasks − Outcome contribution indicators which measure how outputs contribute to the achievement of team, departmental and organizational objectives and how the behavior of individuals support corporate values • To what extent will it be possible to define the criteria in the key jobs for which PRP will operate? • Are performance measures available for these criteria, which will enable fair and consistent assessment to be made? • What form of rating system should be used? • How are we going to ensure that ratings are fair and consistent? • What are our policies be on the size of payments in relation to performance, contribution, skill and competence? • What should our policies to be on the rate of progression and any limits to progression within pay ranges? • Does the organization want to make provision for performance- related lump sum bonuses for special achievement or sustained high-level performance at the top of a range? • Should PRP reviews be separated in time from performance reviews conducted as part of the Performance Management process? • What rating, pay increase and budget guidelines are going to be issued to managers implementing PRP in their departments? • Should performance matrices be used? If so, how should they be constructed? • How PRP will be monitored and its effectiveness be evaluated? • How the cost of PRP would be controlled? • What is the program for developing and introducing PRP?f. Brief and train • How the organization is going to brief and train line managers on the PRP scheme? • How the organization is going to brief employees in general on PRP so that they understand how it will operate and how they will benefit? 18
  19. 19. g. Implement • How the process should be started? Even after due care some unforeseeable problem will arise. It is often advisable to start with a pilot scheme, probably at management level so that they understand the principles, benefits and problem before applying PRP to the people for whom they are responsible. • How to monitor the introductory stages? It is essential to keep closely in touch with how things are going so that problems can be anticipated or dealt with swiftly when they arise. h. Evaluate • Have clear objectives been established for the scheme the progress towards which can be measured and evaluated? • How to carry out a continuing monitoring and evaluation process? • Who is responsible for evaluation and taking any corrective action that may be required? • What points should be covered?9. Evaluating Performance Related Pay It is essential to evaluate the acceptability and cost effectiveness of PRP. The following questions should be answered: • To what extent have the defined objectives of PRP been achieved? • How much have been paid out under the scheme? • What differentials have emerged between high/average performers over, say, 2-3 years? • What measurable benefits has PRP produced in the shape of improved organizational, team and individual performance? • How do managers regard PRP? Do they, for example, believe that it is operating fairly? • To what extent have rewards been linked to key and measurable areas of performance? Are rewards meeting people’s expectations? • Do Performance Management processes provide adequate support for PRP? • Do the organization want to retain PRP in its present form? If not, what are the alternatives?10. Performance Related Pay (PRP) in practice There is no doubt the system of PRP must be made to fit the culture of the organization. This either means that the existing culture can be receptive to the competitive and individual elements of PRP or the culture has to be changed. PRP can be used as part of the change process but, on its own, it is unlikely to be powerful enough to prove successful. 19
  20. 20. 11. Performance Related Pay (PRP) – a judgment? Does Performance Related Pay work? Most experience in the United States is that greater use of performance pay results in improved organizational performance as measured by return on capital employed, particularly when applied to managerial pay. In the United Kingdom, the few studies have been largely negative or inconclusive. Finally, all research has confirmed that employees regard positively the concept of PRP but deny quite strongly that it acts as a motivator for them in practice, and are mostly critical of the resulting procedural and distributive justice. It can be concluded that employees may work harder, in a more focused way and get better results through a PRP system which is under printed by a robust performance management scheme but employees may do this through a mixture of necessity and fear, rather than a genuine desire to do so. Employees need to be developed for superior performance. PRP helps in identifying the development areas for an employee and where he needs to be counseled. The concept of counseling is discussed hereafter. 20
  21. 21. THE COUNSELING PROCESSCounseling is an act of providing professional guidance. It involves the long-termdevelopment and realization of the potential of an employee through the technique ofadvising. Performance management counseling is a valuable tool for superiors touse, particularly when subordinates show substandard performance.I. The main objectives of counseling are: • helping appraisee to realize his potential • helping appraisee to understand himself i.e. his strengths and weaknesses • providing appraisee an insight into his behavior. • helping appraisee to have better understanding of the environment • identifying performance problems or obstacles • encouraging appraisee to generate alternatives for dealing with various problemsII. The counseling process consists of three stages: • Recognition and Understanding : Recognizing and understanding the Indications of problems and issues. • Empowering : Enabling the employee to recognize his own problem or situation and encouraging him to express it. • Resourcing : Managing the problems, this will include the decision on who is best able to act as counselor – the manager or a specialist.III. Approaches to Counseling: The following are different approaches to counseling: 1. The Tell and Sell Approach: • Appraiser lets appraisee know how he/she is doing. • Gets appraisee’s acceptance of the evaluation. • Gets appraisee follow a plan outlined for improvement. 2. The Tell and Listen Approach: • Appraiser lets appraisee know his performance. • Appraiser allows the appraisee to respond. • Appraisee is allowed to think and decide what needs to be done. 3. The Problem Solving Approach: • Appraiser encourages appraisee to identify problem areas. • Appraisee discusses with appraiser in deciding what should be done about the problems. • Steps are taken to solve problems. 21
  22. 22. Of the three approaches discussed above, the problem solving approach is the best approach. The below comparison justifies how: The Tell and Sell The Tell and The Problem Solving Approach Approach Listen Approach Requires Requires skills on Encourages appraisee to review his considerable skill to the part of own performance and identify get people to accept appraiser in problem areas thus motivating criticism listening appraisee Is more of a one- Better than the Appraiser does not impose his way communication `tell and sell decision but discusses problems process, indicating approach’ since it with appraisee authoritarianism involves appraisee Such approach may Appraiser does This also requires skills but is the not motivate the not play a very most effective method of counseling appraisee or even active role where both appraiser and appraisee may turn counter- enjoy confidence of each other and productive work together in the direction of finding out solutions.IV. Counseling is an art and requires skills, which are difficult to acquire in the normal course of work. It is, therefore, suggested that appraisers should be provided with special training by experts in counseling skills. Counseling skills required by a good appraiser are: • Problem identification : recognizing that the problem exists. • Probing : probing by open-ended, non-directing questions to make the appraisee more comfortable. • Listening : ability to listen attentively by probing, evaluating, interpreting and supporting. • Sensitivity : sensitivity to individual beliefs and values. • Reflecting : being able to restate the problem from appraisee’s point of view. • Empathy : having regard for feelings and anxieties of the individual. • Impartiality : ability to remain impartial. • Sincerity : having a genuine attitude of interest and openness to the individual’s problems. • Belief : having the belief that individuals have the resources to solve their own problem, with some help and guidance. 22
  23. 23. V. Follow-up of completed appraisal: Post appraisal is very crucial for helping employee and the immediate superior i.e. appraiser playing the role of a Facilitator and Developer. • Enough time (say one week) should be given for the appraisee as well as appraiser to prepare for Post-Appraisal discussion. • This discussion should be devoted uninterrupted and sufficient time, say an hour or so. • Appraisee should be put at ease and allowed to first speak on his performance. • The appraiser should listen attentively without interruption with patience. • Appraiser should be supportive and objective on performance evaluation of the employee. • Appraiser should discuss the training and development needs with the appraisee. • Finally, the meeting should conclude wherein the appraisee leaves with a feeling of empowerment.The subsequent chapter gives guidelines on Designing an Appraisal Process. 23
  24. 24. Chapter 8 DESIGNING AN APPRAISAL PROCESSBefore understanding the process of appraisal, the following terms are revised:▪ Performance refers to an employee’s accomplishment of assigned tasks.▪ Performance Appraisal is the systematic description of the job-relevant strengths and weaknesses of an individual or a group.▪ Appraisal period is the length of time during which an employee’s job performance is observed in order to make a formal report of it.▪ Performance Management is the total process of observing an employee’s performance in relation to job requirements over a period of time (i.e. clarifying expectations, setting goals, providing on-the-job coaching, storing and recalling information about performance) and then making an appraisal of it. Information gained from the process may be fed back via an appraisal interview to determine the relevance of individual and work-group performance to organizational purposes, improve the effectiveness of unit and improve work performance of employees.Designing an appraisal program poses several questions, which need answers.They are:1. Whose performance is to be assessed?2. Who are the appraisers?3. What should be evaluated?4. When to appraise?5. What problems are encountered?6. How to solve the problems?7. What methods of appraisal are to be used?1. Whose performance should be assessed? The answer is obvious – employees. When we say employees, it is individual or teams? Specifically, the appraisee may be defined as the individual, work group, division or organization.2. Who are the appraisers? Appraisers can be immediate superiors, specialists from the human resource department, subordinates, peers, committees, clients, self-appraisals or a combination thereof. 24
  25. 25. 3. What should be evaluated? One of the steps in designing an appraisal program is to determine the evaluation criteria. It is obvious that the criteria should be related to the job. The criteria for assessing performance can be: a. Quality & Quantity b. Timeliness c. Cost Effectiveness d. Need for supervision e. Interpersonal impact f. Innovation & Creativity g. Problem Analysis h. Customer orientation i. Market Orientation j. Entrepreneurial Drive k. Negotiation skills etc. This is not an exhaustive list, but several other parameters too can be added depending on job requirements and organizational needs.4. When to appraise/rate? The most frequent rating schedules are semi-annual and annual. New employees are rated more frequently than older ones. Some practices call for ratings: ∙ Annually as per company practice ∙ After first 6 months of employment ∙ Upon promotion or within 3 months after promotion ∙ When the job occupied has been reevaluated upward ∙ Upon special request, as when the employee’s salary is below the average pay5. What are the problems related to Performance Appraisal? An ideal Performance Appraisal is done when the evaluation is free from biases and idiosyncrasies of the evaluator. There are many factors of appraisal that lead to failure of the system: a. Negative attitude towards Performance Appraisal: There is a large population of managers who are hostile or indifferent to the Performance Appraisal processes and/or do it badly if they do it at all. i. Hostility from the appraiser: The appraiser reacts indifferently to the appraising system because he believes that it is a waste of time. At times they feel that the scheme has nothing to do with their own needs and it exists to feed the personnel database. 25
  26. 26. ii. Hostility from the appraisee: Hostility from the people at the receiving end arises because they feel Performance Appraisal is simply another method in the hands of the managers to exercise their command and control prerogatives. They feel that the data collected will be utilized as evidence against them. In some cases appraisees even have a feeling that the outcome of the performance evaluation is predetermined by the management or their superiors and the process is completed only as a formality, due to which appraisees lack interest in the entire appraisal process.b. Halo Error: Under this type of error, one marked characteristic or latest achievement or failure of the appraisee (either favourable or unfavourable) may be allowed to dominate the appraisal for the entire year.c. Logical Error: This is a dangerous pitfall for the inexperienced appraiser. He is very often inclined to arrive at similar assessments in respect of qualities that seem logically related.d. Constant Error: When two appraisers rate an appraisee their ratings may be different. One may show consistent leniency by giving him high scores, the other my consistently rate him by giving low scores.e. Central Tendency: It is also called as “Average Ratings”. Here, the appraiser tends to avoid giving frank views to the question asked or the appraiser is in doubt or he has inadequate information or he simply wants to play safe and don’t displease anyone.f. Mirror-Image Error or Projection Error: This error arises when an appraiser expects his own qualities, skills, and values in an appraisee. The appraiser may falsely believe that if the appraisee is good he has to be like him (appraiser) because the appraiser considers himself as the standard.g. Contrast Error: This error occurs in the sequencing of ratings. If superior performers are rated first, average performers are rated down, if poorer performers come first, the average performers will be rated more highly.h. Biases of position, Sex, Race, Religion & Nationality: There is a tendency to rate the occupant at a higher position more favorably than the person in a lower position. Similarly rating can be biased based on sex, religion and nationality too.i. Lack of Skill in conducting Appraisal discussion: Conducting Performance Appraisal discussions require certain skills and training. 26
  27. 27. 6. How to solve the appraiser’s problems? The best way to overcome the problem is to give training to the appraiser. Training can help improve the appraisal system to the extent that distortion occurring due to appraiser errors such as halo, leniency, central tendency and bias are minimized. a. Factors that help to improve accuracy: • The appraiser has observed and is familiar with behaviors to be appraised. • The appraiser has documented behaviors calling for improvement. • The appraiser has a checklist to obtain the review on job-related information. • The appraiser is aware of personal biases and is willing to take action to minimize their effects. • Rating scores by appraisers of one group or organization are summarized and compared with those by other appraisers. • The appraiser focuses attention on performance related behaviors over which he has better control than on other aspects of evaluation. • Higher levels of management are held accountable for reviewing all ratings. b. Factors that may lower accuracy: • The appraiser rates only when administrative actions are contemplated. • The appraiser is unable to express herself/himself honestly and unambiguously. • Appraisal systems, processes and instruments fail to support the appraiser • The appraiser is unaware of causes of rating errors. • The appraiser has to rate employees on factors that are poorly defined.7. Techniques/methods of appraisal to be used? There are different types of systems for measuring the excellence of an employee. Each type has its own advantages and disadvantages. The earlier developed methods, still being used, are Traditional Methods that are non- transparent in nature. While other newer methods are transparent in nature. Each of the method has it’s own format of appraisal form. The various techniques and processes have been explained in the forthcoming chapters. 27
  28. 28. Chapter 9 TRADITIONAL METHODS OF APPRAISALAs explained in Chapter 1 Performance Appraisal is an exercise of observation andjudgment, a feedback process, and an organizational intervention. It is ameasurement process as well as an intensely emotional process. Above all, it is aninexact, human process. While it is fairly easy to prescribe how the process shouldwork, descriptions of how it actually works in practice are rather discouraging.Some of the traditional methods of appraisal are explained below:1. Ranking In this, the superior ranks his/her subordinates in order of their merit, from best to worst. - It is done in a competitive group. - It is done by placing the appraisee on numerical scales i.e. 1 st, 2nd, 3rd etc. in the total group. - Ranking of an appraisee on his job performance/traits against that of another member.2. Person-to-Person/Paired Comparison Under this method the appraiser compares each employee with every other employee, one at a time. - Certain key performance areas/traits are developed. E.g.: Leadership, Creativity, Initiative etc. - A scale for each factor is designed. - A scale of people is also created for each factor. - Each Appraisee is compared to every other person on the scale. - Certain scores for each factor are awarded to the appraisee.3. Grading - Certain categories of traits/performance criteria, which are worth of appraising, are established. E.g. cooperativeness, self-expression, dependability, job knowledge etc. - The actual performance (Key performance area) of an employee is then compared to the predetermined grade definitions. - Appraisee is allotted with the grade, which describes his performance in the best possible manner. - Any grade that is selected should be well defined. 28
  29. 29. 4. Graphic Scales - A printed form, one for each person to be rated is used. - The factors included in the form are Employee characteristics such as leadership, cooperativeness, enthusiasm, loyalty etc. or Employee contribution which includes quantity and quality of work, specific goals achieved, regularity of attendance, responsibility assumed etc. - The traits can be evaluated on continuous scale – the appraiser places a mark along a continuum (range). - The best method to use is the “multiple” type of scale wherein one has to “tick off” the box, which suits the description of an appraisee’s performance. - Certain types of graphs are prepared based on these derived ratings.5. Checklist - A series of questions are presented concerning an appraisee’s behavior. - The appraiser has to reply to the questions in either negative or positive tone- (Yes/No). - The value of each question may be weighted i.e. one can have predetermined scale and scoring to those questions.6. Essay - A blank form is given to the appraiser. - The form contains main heading such as employees’ characteristics, attitudes, job knowledge, potential etc. - The appraiser is asked to put in words his impressions about the employee. - It contains factual and concrete knowledge. - It gives specific information about the employee.7. Confidential Reporting - It is the most traditional way of appraising employee’s performance. The basic assumption here is that since the superior is in direct contact he knows his subordinates better than any other and hence his appraisal would be more appropriate. - The superior writes a paragraph or so about his subordinate’s strengths, weaknesses, intelligence, attitude to work, attendance, conduct and character, work efficiency, etc.8. Critical Incident Method - Initially a set of noteworthy (good or bad) on-the-job behaviours is prepared. This is usually in the form of incidents. - These incidents are given to a group of experts who assign scale values depending upon the degree of desirability for the job. - This checklist is used by superiors for evaluating the employees. - This method helps in identifying the key areas where the employees are weak or strong. - It emphasizes rating on objective evidence and helps in counseling. 29
  30. 30. 9. Forced Choice Technique - In forced choice system the appraiser is forced to choose one from among a group of 4 statements that best fits the individual being rated and one which least fits him. - Each statement is given a value or a score. - The evaluator does not know the score value of statements; hence he cannot show any favor towards the appraisee. - The method of arranging the traits involves a long process from getting the description of “good” or “bad” employees to establishing their validity and reliability.10. Behaviourally Anchored Rating Scales (BARS) - Behaviourally Anchored Rating Scales (BARS) are anchored with descriptive alternative behaviors. - For every given category of behavior or performance, statements are ordered in an ascending or descending order of excellence. - Although these scales represent job-relevant dimensions of performance, they still pose problems in determining which actually, observed behaviours match with specifically anchored performance scales. - Despite this difficulty, BARS are a significant improvement, since they require less inference on the appraiser’s part as against traditional rating approaches.The above methods are non-transparent in nature, as the appraisee or the employeeis not involved in the process of his appraisal. The rating is done entirely by hissuperiors.The other methods wherein employee is appraised not only by his superiorsbut also by the appraisee himself, and in some cases with involvement of thirdparties are newer methods and detailed in Chapters 10 and 11. 30
  31. 31. Chapter 10 RELATIVELY TRANSPARENT METHODS OF APPRAISALAs time has progressed, there have been advancements in the appraisal system. Asagainst the earlier traditional methods, the newer methods include self-appraisal bythe appraisee. After having discussed the appraisal with the appraisee, the appraiserforwards his recommendation to the management for further decision on rewardgiving.Some of the relatively transparent methods have been detailed below:I. Appraisal Discussion – Dialogue Method of Appraisal 1. An appraiser and appraisee get together to engage in a dialogue about the appraisee’s performance and development. It is like a meeting in which views are exchanged so that an agreed conclusion can be reached. The formal appraisal meeting is referred as discussion because there is a free- flowing affair in which both parties are fully involved. 2. The appraisal discussion provides the means through which the five key elements of Performance Appraisal can be achieved. These are: a. Measurement: It assesses results against agreed targets and standards. b. Feedback: It gives the appraisee information on how he or she has been doing. c. Positive reinforcement: It emphasizes what has been done so that it will be done even better in the future. A constructive criticism is done i.e. points that help in improving performance are given. d. Exchange of views: It ensures that the discussion involves a full, free and frank exchange of views about what has been achieved, what needs to be done to achieve more, what appraisees think about their work, the way they are guided and managed and their aspirations. e. Agreement: Both parties jointly arrive at an understanding about what has to be done in order to improve performance and overcome any work problems raised during the discussion. 3. Opening the Discussion During the discussion the appraiser should build up good trust level with the appraisee and should take following steps to open a discussion: a. He should start by reminding the appraisee of the purpose of the discussion, stressing that this is not to dwell unduly on the past but to look to the future. b. The appraisee should be made aware of the time set aside for the discussion to demonstrate that he is not going to rush through it. 31
  32. 32. c. Continue by explaining that the aim is to come to an agreement on what has been achieved since the last meeting and what is to be achieved in the future. d. This should be followed by a brief exchange in which each party itemizes the key points they want to discuss – setting the agenda. e. The discussion can then begin, probably with an invitation from the appraiser to the appraisee to talk generally about the progress he or she has been making during the year with reference to notes made prior to the meeting or a completed preparation form.4. General Guidelines There are a number of general guidelines on how the appraisal discussion may be conducted. Each of them should be applied according to the circumstances in which the discussion is taking place and the personalities of those involved – there is no one right way to conduct an appraisal discussion. a. Let the appraisee do most of the talking. b. Encourage self-appraisal c. Keep the whole period under review d. No surprises i.e. discuss issues at the time they take place. e. Recognize achievements and reinforce strengths f. Criticize constructively g. Adopt a joint problem-solving approach h. Asking the right questions5. There are four basic types of questions: a. Open Questions: Open questions help to create an atmosphere of calm and friendly inquiry. It can be expressed quite informally, and can be put in a ‘tell me’ form. E.g.: How do you think things have been going? b. Probing Questions: Probing questions ask for specific information on what has happened and why it has happened. They examine closely the steps that need to be taken to put things right, do better in the future and avoid repeating a mistake. c. Closed Questions: When there is a need to obtain or confirm specific factual data, a closed question, which severely restricts the reply to supplying the information, is asked. E.g. How many times has this happened? d. Leading Questions: Leading questions are those which supply their own ‘right’ answer, e.g. Do you agree that …….? 32
  33. 33. A typical appraisal discussion contains a mix of open, probing and closed questions. While the conversation should be kept going with open questions, one needs to identify the real issues with probing questions and get the facts with closed questions. Leading questions should be avoided.6. Listen carefully An appraisal discussion is a dialogue. Both parties are communicating information and ideas to one another to achieve the purpose of the meeting. Good listeners concentrate on the speaker. They respond quickly to points made by the speaker, ask questions frequently to elucidate meaning, give the speaker an opportunity to rephrase or underline a point, comment on the points made by the speaker without interrupting the flow of conversation. 33
  34. 34. II. COMPETENCY BASED APPRAISAL SYSTEM What is Competency? Competency is an underlying characteristic of an individual, which is casually related to effective or superior performance. Competence based appraisals can be defined as a method of appraising people wholly or partly by reference to the level of competence they demonstrate in carrying out their roles. One of the problems surrounding the concept of competence or competency is that the term is used to refer to the ability to perform a job or task competently and also to how people ought to behave in order to carry out a role with competence. ∙ Competence should be used to refer to areas of work in which the person is competent. ∙ Competency should be used to refer to the dimensions of behaviour lying behind competent performance. 1. Competence based appraisal must depend on some method of measuring competence. To do this, it is useful to distinguish between the input, process and output aspects of performance and how competence can be measured under each heading. a. As an input, competence can be measured by the capacity within people to do their work well. Capacity refers to what people bring to their work in the form of knowledge, skills and personal attributes. b. As a process, competence can be measured in terms of the behaviour required of people in order to effectively convert inputs into outputs. c. As an output, competence is measured by the outcomes of the behaviour of people in making the best use of their knowledge, skills and attributes. 2. Appraisals can be related to competence in two ways: • as a people-based process which links assessment to the level of competence attained by individuals; or • as a job-based process which uses competence headings wholly or partly to evaluate jobs or roles. Both levels of competence and levels of performance in achieving objectives, should be taken into, on the reasonable grounds that they should be assessed not only for how people perform (competence inputs) but also for what they achieve (outputs). 34
  35. 35. 3. Advantages of competence based Appraisal System ∙ High-performance organizations need high levels of competence and hence employees should be appraised according to their level of competence and the contribution they therefore make to the success of the business. ∙ Performance-linked appraisals help companies in performance enhancement of employees. Hence competence is important. ∙ Competences add value and predict success and hence attributes that lead to successful performance should be appraised. ∙ It can provide for the alignment of rewards with core values. ∙ It can support a culture devoted to learning, growth and continuous development. ∙ It can deliver messages to people about the behaviour expected of them in such aspects of work as team membership, flexibility, continuous improvement, customer relations. ∙ It can focus attention on the competences required in knowledge-based organizations which are selling services or solutions, not products, and are therefore people rather than task or product oriented. ∙ Competences are geared to sustained performance and are better predictors of future performance than what people happen to have done in the past. ∙ It is recognized that it is necessary to assess and reward what people bring to a role in the shape of their knowledge, skills, attributes and competences as well as the results they achieve. 35
  36. 36. III. POTENTIAL APPRAISAL Assessment Center Method Under this method, many evaluators i.e. appraisers join together to judge employee performance in several situations by using variety of criteria The most important feature of this method is job-related simulations. These simulations involve characteristics that managers feel are important for the job success. The evaluators observe and evaluate participants as they perform activities commonly found in these higher-level jobs. It involves a paper-and- pencil test, interviews and exercises. 1. Features: • The use of situational exercise (such as in-basket exercise, business game, a role-playing incident and leaderless group discussion); • Evaluators are drawn from experienced managers with proven ability at different levels of management; • They evaluate all employees, both individually and collectively. • A summary report is prepared by the members, and a feedback on a face-to-face basis is administered to all the candidates who ask for it. 2. Purpose: a. It is used to: • Measure potential for first level supervision, sales and upper management positions; and also for higher levels of management for development purposes. • Determine individual training and development needs of employees. • Select freshers for entry-level positions. • Provide more accurate human resource planning information. • Assist in implementing affirmative action goals. b. It generally measures interpersonal skills and other aspects such as: organizing and planning; interpersonal competence (getting along with others), quality of thinking, resistance to stress, orientation (motivation) to work, dependence on others and creativity. The ability to organize, plan and make decisions, as in-basket simulations and scores obtained on paper and pencil, psychological tests, are important to the overall assessment score. The duration of Assessment Center Program varies depending on the level of appraisee. For example, centers designed for selection of first line supervisors, sales personnel, and management trainees generally last for a day or less; while those used for higher-level managers may run for two or three days or longer if used for developmental and not for selection purposes. 36
  37. 37. 3. Problems: • The ratings are generally influenced by the participant’s interpersonal skills; judges tend to evaluate the quality of the individual’s social skills rather than quality of the decisions themselves. Further, the organizing and decision-making abilities are measured by in-basket exercises, verbal ability and personal traits. • Solid performers in day-to-day operations suddenly choke in simulated environment. • Unreasonably high cost of assessing an individual in a particular job level. • There are potential bad effects on those not selected to participate in the exercise. • Usually immediate supervisors nominate participants. Employees who are curious, independent, aggressive and intelligent may never be selected because such traits, though important at higher levels, are not accepted by lower level supervisors. • Poorly rated appraisee may react in negative ways and might get demoralized.To make Assessment Center Program successful, strong emphasis must beplaced on clear statement of goals, obtaining commitment of top management,job analysis, appraiser training, program audit and evaluation. 37
  38. 38. IV. PERFORMANCE AND DEVELOPMENT PLANNING Performance and Development Planning (PDP): PDP is a process for managers that aligns individual performance with company goals and ensures focus on the development of talent company-wide. PDP is an important step in their corporate effort to engage and enable employees to deliver their contribution to their business. Also, PDP serves to enable employees to identify and realize personal opportunities for development that are aligned to current and future business challenges. PDP process enables each employee to understand his true value-added to the organization. 1. Steps for successful implementation of PDP: • Schedule the PDP meeting and define pre-work with the appraisee. • The appraisee does self-appraisal, writes business and personal developmental goals on the PDP form and gathers needed documentation, including 360º feedback results, when available. • The appraiser prepares for the PDP meeting by clearly defining the most important outcomes needed from the appraisee’s job within the framework of the organizations strategic plan. • The appraiser writes business and personal developmental goals on the PDP form in preparation for the discussion. • The appraiser gathers data including work records and reports and input from others familiar with the apprasiee’s work. • Both the appraiser and the appraisee examine how the appraisee is performing against all criteria, and think about areas for potential development. • The appraiser develops a plan for the PDP meeting that includes answers to all questions about the PDP process with examples, documentation, and so on. • Recognize that this process takes place quarterly and that the most time and work are invested in the first PDP meeting. • The rest of the quarterly PDP goals, maybe for years, are updates to the initial goals. • So, while seemingly time consuming on the front end, the PDP process, with a formal, effective foundation of solid personal and business goals, is less time consuming as quarters pass. The PDP continues to create business and employee success and value during its lifetime. With quarterly updates, the PDP process contributes into the future. 2. PDP Process: The PDP process has been explained with the help of a chart as Annexure I. A sample format of PDP form is attached as Annexure II and the PDP form overview is explained in brief as Annexure II (a). All these Annexures have been included at the end of the report. 38
  39. 39. As part of a relatively transparent method of appraisal, a sample form designed andused by a reputed pharmaceutical company for appraising it’s employees at juniormanagement level is shown as Annexure III at the end of this report.The latest trend of appraising the performance of an employee involves two or moreof any of the above detailed techniques including traditional methods.The subsequent chapter details the new frontiers to performance appraisal. 39
  40. 40. Chapter 11 NEW FRONTIERS TO PERFORMANCE APPRAISALIn recent years the system of performance appraisal is becoming more and moretransparent wherein the employee, who is being appraised, is involved in theprocess. The objectives or targets are set with mutual understanding between theappraisee and his immediate superior. The feedback regarding his performance isgiven to the appraisee with areas of improvement by disclosing his strengths andweakness and the opportunities available. I will take you into details of these newfrontiers to Performance Appraisal viz: I. Management by Objectives (MBO) II. Balanced Scorecard III. 360º FeedbackI. MANAGEMENT BY OBJECTIVES 1. Management by Objectives is basically a process whereby the superior and the subordinate managers of an enterprise jointly identify its common goals, define each individual’s major areas of responsibility in terms of the results expected of him and use these measures as guides for operating the unit and assessing the contribution of each of its members. Management by Objectives is primarily to change the behaviour and attitude towards getting an activity or assignment completed in a manner that it is beneficial for the organization. Management by objectives is a result-oriented process, wherein emphasis is on results and goals rather than a prescribed method. A number of companies have had significant success in broadening individual responsibility and involvement in work planning at the lowest organizational levels. 2. The concept rests on a philosophy of management that emphasizes integration between external control (by managers) and self-control (by subordinates). It can apply to any manager or individual no matter what level or function, and to any organization, regardless of size. For instance, the number of quality articles to be churned out in a week at a publishing house is, let’s say, five. This is the goal of the organization. This goal has to be set in coordination with the writers. The emphasis here again would be on accomplishing this task flawlessly over the week rather than the setting of a method to accomplish the same. You are giving them a free hand to decide as to how they want to work in order to accomplish target. This gives the employee both responsibility as well as authority to do a job. The employees are now responsible for its success or failure and it is their baby. It is a VERY SMART MANAGEMENT TOOL where the employee is involved in the decision making process. 40
  41. 41. 3. Management by Objectives is a five-sutra process having following basic steps: i. Set Organizational Goals: This envisages that organizational goals and business strategies are expressed clearly, concisely and accurately. They are periodically reviewed. They should be challenging enough to motivate the employee. Clear and attainable goals help channel energies towards desired behaviour and let the employee know the basis on which he will be rewarded. At this time, any appropriate changes in the organization structure should be made: changes in titles, duties, relationships, authority, responsibility, span of control and so forth. ii. Joint Goal Setting: This step establishes short-term goals, which are performance oriented, between the management and the employee. The responsibilities are clarified to the employees through organizational charts and job description. The goals decided by the employee need to complement the goals of the management. They also need to be flexible to accommodate new ideas without losing individual responsibilities. Moreover they should be easily quantifiable. For example:  To prepare, process and transfer to the office superintended, all account payable vouchers within three working days from the receipt of the voucher.  To hold weekly meetings with all employees.  To use program evaluation and review technique (pert) for all new plant layouts. iii. Performance Reviews: This step suggests frequent performance reviews between the manager and the employees. During the initial stages the meetings be held once a month and later could be quarterly. For maximum benefit these meetings should be scheduled for more than once a year. iv. Set check posts: Establishment of major check posts to measure progress. This is merely to check that the employee surges towards his premeditated (planned) goal without any disruptions. These check levels should be higher in the initial stages and then gradually reduce. This demands that the manager should be on constant alert and exercise sound judgment. v. Feedback: The employees who receive frequent feedback about their performance are highly motivated than those who do not. However, one has to ensure that the feedback is relevant and specific. This helps the employee and the manager understand where they stand. 41
  42. 42. The five-sutra process of management by objectives ensures that the manager and the employee define and establish goals and objectives for an employee to be achieved within a prescribed period of time. The employee is to be supervised and evaluated, periodically. To this extent, a frequent feedback and superior-employee interaction model must be evolved.4. Throughout the time period what is to be accomplished by the entire organization should be compared with what is being accomplished; necessary adjustments should be made and inappropriate goals discarded. At the end of the time period a final mutual review of objectives and performance takes place. If there is discrepancies between the two, efforts are initiated to determine what steps can be taken to overcome these problems. This sets the stage for the determination of objectives for the next period.5. Benefits of MBO Program a. Helps and increases employee motivation because it relates overall goals to the individual’s goals; and help to increase an employee’s understanding of where the organization is and where it is heading. b. Managers are more likely to compete within themselves than with other managers. This kind of evaluation can reduce internal conflicts that often arise when managers compete with each other to obtain scarce resources. c. Results in a “means-ends” chain. Management at succeedingly lower levels in the organization establishes targets, which are integrated with those at the next higher level. Thus, it can help ensure that everyone’s activity is ultimately aimed toward organization’s goals. d. Reduces role conflict and ambiguity. Role conflict exists when a person is faced with conflicting demands from two or more supervisors; and role ambiguity exists when a person is uncertain as to how he will be evaluated, or what he has to achieve. Since MBO aims at providing clear targets and their order or priority, it reduces both these situations. e. Provides more objective appraisal criteria. The targets that emerge from the ` process provide a sound set of criteria for evaluating the manager’s performance. f. Forces and aids in planning. By forcing top management to establish a strategy and goals for the entire organization, and by requiring other managers to set their targets and plan how to reach them. g. Identifies problems better and early. Frequent performance review sessions make this possible. h. Identifies performance deficiencies. It enables the management and employees to set individualized self-improvement goals and thus proves effective in training and development of people. 42
  43. 43. i. Helps the individual manager to develop personal leadership, especially the skills of listening, planning, counseling, motivating and evaluating. This approach to managing instills a personal commitment to respond positively the organization’s major concerns as well as to the development of human assets. Such a manager has a far greater chance to move ahead within the management hierarchy.A blank format of “Management by Objectives Appraisal form” is reproduced asAnnexure IV at the end of this report. 43
  44. 44. II. 360° FEEDBACK With the movement in the eighties to find new strengths and productivity through employee empowerment came the idea of performance appraisals from subordinates, their superiors, their peers and themselves – “360º feedback.” 1. The 360º Feedback process is called multi-source assessment, taps the collective wisdom of those who work most closely with the employee, superiors, colleagues (peers), direct reports and possibly internal and often external customers. The collective intelligence these people provide on critical competencies or specific behaviours and skills gives the employee a clear understanding of personal strengths and areas ripe for development. Employees also view this performance information from multiple perspectives as fair, accurate, credible, and motivating. Employees are often more strongly motivated to change their work behaviours to attain the esteem of their coworkers than to win the respect of their supervisor alone. 2. As the 360º Feedback process better serves the needs of employees, it serves the changing needs of their organizations too. Organizations are reducing hierarchy by removing layers of management and putting more emphasis on empowerment, teamwork, continuous learning, individual development, and self-responsibility. The 360º Feedback Model aligns with these organizational goals to create opportunities for personal and career development and for aligning individual performance expectations with corporate values. 3. Diagram showing the key stakeholders in a 360º Feedback Process 44